Chapter 6 Flashcards
A statement that lists account names and their balances, recorded in debit and credit columns, on a certain day
Trial balance
The value of inventory that has remained unsold at the end of the financial year
Closing inventory
Goods ready for sale after having gone through the manufacturing process
Finished goods
Items that are not yet completed and only partly made
Work in progress
Inventory that a business has at the start of the year. Represents an asset and hence will be a debt balance. Last year’s closing inventory
Opening inventory
Errors that occur when a transaction is completely omitted from the books
Errors of omission
Errors that occur when the correct amount is entered, both debit and credit, but one of the entries is made in an account belonging to a different class
Errors of principle
Errors that occur when the correct amount is entered, both debit and credit, but in the wrong account of the same class
Errors of commission
Errors that occur when two or more errors cancel each other out
Compensating errors
Errors that occur when an incorrect figure was used to record a transaction, both debit and credit
Errors of original entry
Recording a total that is more than the true total
Overcast
Totalling
Casting
Errors that occur when the correct amounts are used but double entries are made on the wrong side of the accounts concerned
Errors of complete reversal of entries
Trial balance
A statement that lists account names and their balances, recorded in debit and credit columns, on a certain day
Closing inventory
The value of inventory that has remained unsold at the end of the financial year
Finished goods
Goods ready for sale after having gone through the manufacturing process
Work in progress
Items that are not yet completed and only partly made
Opening inventory
Inventory that a business has at the start of the year. Represents an asset and hence will be a debt balance. Last year’s closing inventory
Errors of omission
Errors that occur when a transaction is completely omitted from the books
Errors of principle
Errors that occur when the correct amount is entered, both debit and credit, but one of the entries is made in an account belonging to a different class
Errors of commission
Errors that occur when the correct amount is entered, both debit and credit, but in the wrong account of the same class
Compensating errors
Errors that occur when two or more errors cancel each other out
Errors of original entry
Errors that occur when an incorrect figure was used to record a transaction, both debit and credit
Overcast
Recording a total that is more than the true total
Casting
Totalling
Errors of complete reversal of entries
Errors that occur when the correct amounts are used but double entries are made on the wrong side of the accounts concerned
What are the purposes and uses of a trial balance?
To prepare the income statement and the statement of financial position
To verify accounting records
To help locate errors
Which errors will show up in the trial balance?
Arithmetical errors, using different figures for matching debit/credit entries, entering only one aspect of a transaction, entering a transaction twice on one side (two credits instead of a debit and a credit)
Which errors don’t show up on the trial balance?
Compensating errors, errors of commission, errors of complete reversal, errors of omission, errors of original entry, errors of principle
